Fractional Reserve Banking:A banking system where banks are only required to hold a fraction of their deposits as reserves, allowing them to lend out the remaining portion and create new money.
Monetary Policy:The actions taken by a central bank, such as the Federal Reserve, to influence the money supply and interest rates in order to achieve economic objectives.
Money Multiplier: The process by which a change in the monetary base leads to a larger change in the total money supply, based on the reserve requirement ratio.